Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

PM–32. Letter from the Secretary of State to the Secretary of Defense (Gates)¹

Washington, February 17, 1960

Dear Tom:

On the subject of third country imports and luxury items for resale by Canal Zone agencies, I recently recommended to the President, on foreign policy grounds, that he instruct your Department to direct the Caribbean Command to revise its procurement policies on third country imports for resale in its sales stores to conform with those polices already in effect by the Panama Canal Company. I informed the President that our two Departments had found a satisfactory solution with regard to luxury items sales.

I am sure you will have seen Brigadier General Goodpaster’s memorandum of February 9 to you and me,² in which he reports that the President had noted the willingness of your Department to have this Department resolve the remaining differences on the matter of third country imports for resale by Canal Zone agencies, and had requested me to do so, giving the maximum consideration I deem feasible to the views of the Department of Defense as expressed in Secretary Douglas’ letter to the President of February 5.³

Therefore, in accordance with the President’s request to me, please direct the Caribbean Command to revise its procurement policies on third country imports for resale to conform with those now in effect by the Panama Canal Company, which are that all third country imports for resale in Canal Zone sales outlets shall be banned, except for gasoline.

On luxury items for resale in Canal Zone sales outlets, my understanding is that certain luxury items shall be banned if their acquisition cost exceeds $50. Household appliances usually regarded as necessities will be excepted.

I shall be grateful if you would inform me when the necessary steps have been taken to implement this request, in order that I may inform the President of the resolution of this problem.⁴

I am sending a copy of the letter to the Secretary of the Army for his information.

With warmest personal regards,

Most sincerely,

Christian A. Herter

1. Source: Department of State, Central Files, 419.006/2–1760. Drafted by Sharp on February 15.
2. Not printed; 611.1913/2–960.
3. The recommendations of the Department of Defense, as summarized in under Secretary Douglas’ letter of February 5 to President Eisenhower, was to ban the resale of only those products that were of special interest to the Panamanians-rice, beef, beer, and milk derivatives-while continuing the resale of other third country imports and luxury items. (Eisenhower Library, Staff Secretary Records, International Series)
4. Deputy Assistant Secretary of Defense Knight informed Under Secretary for Political Affairs Merchant on February 24 that the Department of Defense was ready to implement the new policies governing third country purchases and asked the Department of State if the new instructions could go into effect on March 15. Merchant concurred in the Defense Department’s request. (Memorandum of Conversation, by Merchant, February 24; 611.1913/2–2460) On February 24, Acting Secretary of State Dillon informed Secretary of State Herter of this decision. (Telegram Tosec 9 to Rio de Janiero; Eisenhower Library, Staff Secretary Records, “Panama”)